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Q3 2024 Forge Investment
Outlook

For Professional Investors Only

Private market shows no signs of slowing down in Q2

July 18, 2024

Bolstered by an improving macroeconomic backdrop and continued investor demand for artificial intelligence companies (or companies integrating AI into their businesses), both public and private markets enjoyed a strong second quarter, a welcome outcome for investors as the summer arrives and vacations beckon.

Key Takeaways
  • The private market continued its upward movement in Q2 - The Forge Private Market Index outperformed the Russell 2000 and Renaissance IPO index in Q2, though it trailed the large-cap S&P 500 and NASDAQ 100 indices. Fintech was the strongest performer among eligible sectors this quarter, and more companies in the index were marked up versus marked down.

  • Investor enthusiasm remains high despite reduced primary fundraising - Although Q2 saw slightly less money raised and fewer primary rounds than Q1, there are multiple signs that investors remain positive on private companies. New unicorns are being minted across diverse sectors and recently funded companies continue their trend of raising up-rounds.

  • Secondary market metrics continue suggesting investor optimism - Secondary market investors showed sustained interest in AI and fintech companies in Q2, as evidenced by a bid-ask spread of 6.4% (compared to the 3-year median of 11.4%), as well as completed trade data that demonstrated an improved discount to primary valuations on average. Meanwhile, companies exercised their right of first refusal (ROFR) at slightly higher rates quarter-over-quarter.

INSIDE THE REPORT
  • Market Performance 6
  • Primary Market Activity 12
    • Funding Round Step-Up Distribution 15
    • New Unicorns 16
    • Largest Step-Ups and Step-Downs for Unicorns 17
  • Secondary Market Activity 18
    • Funding Year Cohort Forge Price Performance 19
    • Trade Price Distribution 20
    • Indications of Interest Bid-Ask Spread 21
  • Mutual Fund Marks 25
  • Exit Activity 28
    • Exit Trends 29
    • Q2 Completed and Announced Exits 30
    • Select Q2 IPO Forge Price Analysis 32

Forge Private Market Index outpaces comparable Public Market benchmarks while slightly trailing large caps

The Forge Private Market Index (FPMI) rose 0.8% in Q2 2024, trailing the SPY (S&P 500) and QQQ (NASDAQ 100) ETFs but outpacing the IWM (Russell 2000) and IPO (Renaissance IPO) ETFs during the same period. In some ways, the Forge Private Market Index is more comparable to the Russell 2000 than the S&P 500.

Forge Private Market Index continues increasing trend of individual companies being marked up, fewer markdowns

In the second quarter, 36% of companies in the Forge Private Market Index were marked up, continuing an upward trend that started in Q3 2022 and representing the highest percentage of markups since Q4 2021. Nine companies were marked up by >20%, and the average performance of companies marked up was +20%, a decline from last quarter’s average 33% markup of companies marked up in Q1. 40% of companies were marked down in Q2 2024, an improvement on last quarter – although the average markdown increased slightly to -16% from -14%.

Investment interest remains skewed to the buy-side on Forge Markets in Q2 2024

As of the end of Q2, the buy-side represented 55.2% of all IOIs on Forge Markets, a small decline from this year’s high of 61.4% in March but overall showing a continuation of the buy-side trend that started at the beginning of the year. Thus far in 2024, only two months have seen more sell-side than buy-side demand.

Authors
Andrew Alden, CFA
Senior Director of Quantitative Research, Forge

Prior to joining Forge, Andrew launched Semantiqa, an investment management firm focused on the public-market growth equities space. Andrew has also held researcher positions at WeatherStorm Capital and Lattice Strategies (now Hartford Funds).

Dan Chaparian
VP, Product Marketing, Forge

Before joining Forge, Dan was VP, Global Product Marketing, for BlackRock's iShares ETF business. He previously held positions at Apple and Uber and is a former startup founder.

Craig Derbenwick
Senior Director, Content Strategy, Forge

Prior to his role at Forge, Craig was a marketing consultant serving global and boutique investment management and fintech clients. He has also held marketing roles at UBS Asset Management, Brookfield Asset Management, and Envestnet Asset Management.

Riley Martin
Senior Data Analyst, Forge

Before joining Forge, Riley was a Consultant for Strategy and Analytics at Deloitte assisting large tech clients with in-depth analysis of global data.

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The performance shown represents past performance, and past performance is not indicative of future results. Investing in private company securities is not suitable for all investors, is highly speculative, involves a high degree of risk, and you should be prepared to withstand a total loss of your investment. Private company securities are highly illiquid and there is no guarantee that a market will develop for such securities. Each investment also carries its own specific risks and investors should conduct their own, independent due diligence regarding the investment, including obtaining additional information about the company, opinions, financial projections and legal or investment advice. Accordingly, investing in private company securities is appropriate only for those investors who can tolerate a high degree of risk and do not require a liquid investment.

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